Regulatory measures on cryptocurrency were forthcoming, given the exponential growth in the digital asset world. Texas could be the first state to pass crypto regulation.
The bill (HB 1666) by State Rep. Giovanni Capriglione calls for more oversight in a largely unregulated crypto market. While one of the prime features of cryptocurrencies is their lack of regulation, more government oversight could attract more investors who are wary of investing in digital assets.
More regulation could draw more investors, retail and institutional, as the digital asset space continues its maturation process. The call for regulation comes after the crypto market exited a bearish 2022 and is off to a bullish 2023 midway through the year.
The two largest cryptocurrencies have retreated as of late but are still in the green, following the broader stock market. Bitcoin is up over 60%, while ether is up over 50% for the year.
Texas could be one of the first U.S. states to regulate cryptocurrency pending Gov. Signature.
It would require digital asset providers like Coinbase to:
– maintain enough funds to ensure customers can withdraw their assets.
– eliminate co-mingling of funds
-A yearly audit
— Daranesha Herron (@Daraneshatv) May 29, 2023
“You will be comfortable knowing that when you invest online, when you’re buying cryptos, when you’re trading it, when you’re selling, those assets are being watched, that they are being managed, and that there’s an audit trail that protects those assets,” Capriglione said.
Bill Targets Digital Asset Service Providers
The bill itself takes aim at digital asset service providers in particular. After the collapse of cryptocurrency exchange FTX in November 2022, cries for more regulation were amplified. This bill addresses certain concerns related to the collapse.
Per a KVUE report, here are some important features of the bill:
- Maintaining reserves sufficient to allow providers to fulfill their obligations to consumers.
- Ensuring that customer funds aren’t held up and that customers are able to withdraw their funds at any time.
- Allowing consumers the ability to view any outstanding liabilities owed to the digital asset customer as well as any assets held in custody by the digital asset service provider.
- Storage of reserves will be held in either an omnibus account where customers’ digital assets are not strictly segregated from each other or in the digital asset corresponding to customers’ obligations.
- Not commingling customer funds with funds that belong to the digital asset service provider.
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